Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/231299
Authors: 
Klein, Daniel
Ludwig, Christopher A.
Nicolay, Katharina
Spengel, Christoph
Year of Publication: 
2021
Series/Report no.: 
ZEW Discussion Papers No. 21-013
Abstract: 
In its 2015 Final Report on 'Measuring and Monitoring BEPS, Action 11', the OECD introduced six indicators to quantify and evaluate base erosion and profit shifting (BEPS) activity over time. In this study, we revisit three selected indicators, provide a numerical update for recent periods using timely data and point out potential pitfalls when interpreting the indicator results. First, we transparently replicate Indicator 1, which intends to assess the disconnect between financial and real economic activities, and show a moderately decreasing trend of the indicator estimates. Second, replicating Indicator 4, which is based on a micro-data regression approach, we find that multinational firms have, on average, lower effective tax rates than domestic firms. We confirm this result using a state-of-the-art propensity score matching approach. Third, the replication of Indicator 5, which intends to capture profit shifting through intangibles, shows a stable trend of the annual indicator estimates that extends beyond the OECD's sample period. Yet, the simplistic design of all indicators comes at the price of making them vulnerable to a number of confounding factors and economic effects that go beyond profit shifting. Overall, we conclude that the proposed indicators in the Final Report on BEPS Action 11 provide only limited information on the extent of BEPS.
Subjects: 
Tax
Tax policy
International Taxation
BEPS
OECD
Base Erosion and Profit Shifting
Business Taxation
Corporate Tax Regulations
JEL: 
H20
H25
H26
L25
Document Type: 
Working Paper

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